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Pensions and self-employment

Updated on 27 April 2023

Self-employment

This page looks briefly at some of the main types of pension that you may be able to have. If you want more information on any of them, we suggest you go to our tax basics section.

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Pensions for the self-employed

Pensions are a type of investment plan allowing you to save up for later in life.

Employers are obliged to have a minimum level pension scheme in place for workers aged 22 and over who earn more than £10,000 per year (in 2023/24) under the auto-enrolment rules.

‘Worker’ is a legal term rather than a tax term. Workers are generally employees, but sometimes you can be self-employed for tax purposes but still be classed as a worker for employment law purposes. You can read more about this on the page Am I employed, self employed, both or neither?.

Some information about what is meant by being a ‘worker’ for this purpose can also be found on GOV.UK.

Therefore, in some circumstances you could be a worker for employment law purposes, which includes auto-enrolment, but be self-employed for tax purposes.

As there is no auto-enrolment requirement for the self-employed who are not workers, it is up to you to consider how you might save for your retirement and you may well choose to make provision for yourself.

Growth on your pension savings is generally free of tax. When pensions are paid out, they are usually taxable, but you should be able to take some part of the pension as a tax-free lump sum.

We cannot advise which type of scheme might be best for you, nor whether or not you should pay into a particular pension.

We recommend that you get some financial advice, for example from an independent financial adviser (IFA) or there is information on the Moneyhelper website.

What are the different types of pension scheme?

What is the state pension?

The government pays the state pension as a regular payment to eligible people who have reached state pension age. You can work out when you will reach state pension age by using the calculator on GOV.UK.

If you are self-employed, paying Class 2 National Insurance contributions (NIC) helps you to qualify to receive the state pension.

There is more information about the state pension in our tax basics section.

Can self-employed people sign up to auto-enrolment pension schemes?

Although there is currently no way of self-employed people being automatically enrolled into a pension, some of the low-cost pension schemes that are used by employers for their employees are also open to the self-employed.

What are stakeholder and personal pensions?

A personal pension plan is a way of saving regularly for your retirement. You can set one up yourself and invest in it personally. The funds in the scheme are invested to save up for when you retire. You can get a personal pension or stakeholder pension (which is a specific kind of personal pension) from financial services companies such as insurance companies, bank and building societies (known as 'providers').

There is more information about stakeholder and personal pensions in our tax basics section.

What are retirement annuity schemes?

If you took out a personal pension policy before 1 July 1988, this would have been called a retirement annuity policy.

There is more information about retirement annuity schemes in our tax basics section.

What are the rules for paying into pensions?

The tax relief you can get on pension savings is limited.

You can save in more than one pension scheme at the same time, for example in two different personal pension schemes; or if you are self-employed and also employed you can save into a personal pension scheme as well as in your employer's pension scheme.

There is more information on the tax basics section on the rules for pension contributions, including tax relief and the annual allowance.

When can I take my private pension?

Generally, the earliest you can take your personal pension is at age 55 (rising to age 57 from April 2028).

More information on the rules for taking pensions is given in our pensioners section.

Where can I find more information?

See our tax basics section for a list of more sources of information.

Tax guides

Introduction to the tax system How do I work out my tax? What income is taxable? What tax allowances am I entitled to? What tax rates apply to me? How is my tax collected? What if I cannot pay my tax bill? Do I need to complete a tax return? Self Assessment: understanding the basics What is Simple Assessment? How do I claim tax back? How do I claim back tax I have overpaid through PAYE on wages or pensions? How do I claim back tax if I complete a tax return? How do I claim back tax if I am taxed under the Construction Industry Scheme (CIS)? How do I claim back tax on savings income? How do I claim a marriage allowance refund? How do I claim back tax on a payment protection insurance (PPI) pay-out? Should I use a tax refund company? What is National Insurance? How do I get a National Insurance number? What are Specified Adult Childcare credits? What is Scottish income tax? What is devolution? Do I have to pay Scottish income tax? How does Scottish income tax work? What is Welsh income tax? Do I have to pay Welsh income tax? Do I have to join a pension scheme? Tax relief on your pension contributions HMRC digital services Enquiries, penalties, appeals, complaints and debt Enquiries How to survive an enquiry by HMRC Tax penalties Tax appeals Alternative Dispute Resolution How do I complain to HMRC? What if I cannot pay my tax bill? What if I have a tax credits overpayment?
Am I employed, self-employed, both or neither? Working through a limited company What is the national minimum wage? How do I work out my tax? What income is taxable? What tax allowances am I entitled to? What tax rates apply to me? How is my tax collected? How is tax collected on taxable state benefits? How do I check my coding notice? Do I need to complete a tax return? What tax do I pay on redundancy payments?Employment benefits and expenses What are benefits-in-kind? What payments and benefits are non taxable? What if I incur expenses in relation to my job? What travel expenses can I claim? What if I use my own car for business purposes? Payroll giving Allowances and expenses paid to armed forces personnel and deductions from their income Pensions and employees What is automatic enrolment for employees? What National Insurance do I pay as an employee? How do I repay my student loan? What if I do not pay enough tax? What if I pay too much tax? What if I work abroad temporarily? What if I am in the armed forces and work overseas? First time workers Apprenticeships

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